Now that Boise-based Albertsons has ended a grocery merger attempt with Cincinnati-based Kroger and filed a lawsuit against its former proposed partner, what happens to the stores?
For now the answer is nothing, but court testimony and statements from the two companies’ CEOs indicate that might not be the case down the road, at least for one of the rivals.
A proposed divestiture list made public in July included around 30 stores just in the South Sound region, including various Haggen, Safeway, Albertsons and QFC sites. The list highlighted how prevalent the brands are in the area, with some stores within blocks of each other.
Those projected spinoffs are a thing of the past as a result of Wednesday’s actions by Albertsons terminating the deal and filing its lawsuit against Kroger, which came after injunctions issued Tuesday by two judges blocking the proposed deal.
At Tuesday’s hearing in Seattle where an injunction was issued against the proposed mega-merger, King County Superior Court Judge Marshall Ferguson said that: “In my view, the evidence convincingly shows that the current competition between Kroger and Albertsons stores is fierce in the State of Washington.”
Ferguson added, “By contrast, the divestiture buyer, C&S Wholesale, with its limited retail experience, will not be able to replicate the ferocity of that competition or compete in Washington against the colossus of a merged Kroger and Albertsons.”
That decision came following a September trial in Washington state’s antitrust case challenging the merger.
The injunction was one of two legal blows dealt Tuesday to the Kroger-Albertsons proposed merger, coming the same day a federal judge granted the Federal Trade Commission’s request for a preliminary injunction.
The Idaho Statesman reported Wednesday in its coverage that the breakup “is worse news for Albertsons than for Kroger” and cited testimony in the federal case from Albertsons CEO Vivek Sankaran.
Sankaran had testified that without the merger, he would have to consider other reductions, including finding another partner, and/or potentially abandoning some markets if the chain could not find other ways to lower costs.
In contrast, Kroger president and CEO Rodney McMullen told investors last week during Kroger’s earnings call that his company was well positioned and “always made sure that we don’t need to do mergers to make our business successful,” according to Grocery Dive.
Albertsons’ lawsuit against Kroger seeks a $600 million termination fee as well as billions of dollars in legal fees and lost shareholder value, The Associated Press reported Wednesday.
Kroger said the claims were “baseless” and that Albertsons was not entitled to the fee.
Local unions with United Food and Commercial Workers International Union represent more than 100,000 grocery store employees at Albertsons and Kroger-owned stores in 14 states and the District of Columbia. In a statement issued Wednesday following Albertsons announcement, they called on the companies “to use their unspent billions to invest in workers, customers and stores.”
“Following yesterday’s court rulings blocking the proposed Kroger and Albertsons mega-merger, we welcome Albertsons’ decision to terminate the merger transaction, meaning there will be no further court appeals seeking to complete the merger,” UFCW Locals 7, 324, 400, 770, 1564 and 3000 said in a statement Wednesday.
The unions noted the estimated billions already spent by the firms in relation to the transaction plans.
Faye Guenther, president of UFCW 3000, said in a statement, “These developments ... provide the opportunity for what we have been saying for years that these companies should be doing — investing their money in better wages, better staffing, improved safety, more stores, and lower prices.”
